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This proceeding arose upon a request for hearing made by Kenneth Bryant to contest the pending cancellation of property insurance coverage issued by MMG Insurance Company. On September 10, 2003, the insurer mailed a notice of cancellation effective October 7, 2003 on policy number DC10877108, citing as the grounds for cancellation: “Substantial change in the risk, which increases the risk of loss after insurance coverage has been issued or renewed. Property in dangerous condition.” Pursuant to 24-A M.R.S.A. § 3007, the insured's hearing request was timely.

A hearing on this issue was held on October 8, 2003 with Connie Mayette sitting as designated hearing officer, pursuant to Title 24-A M.R.S.A. § 3007. The purpose of the hearing was limited to establishing the existence of the proof or evidence given by the insurer to support its reason for policy cancellation. Staff representing MMG Insurance Company appeared at the hearing. Kenneth Bryant submitted a statement in lieu of appearance at the hearing.

FINDINGS OF FACT
The following facts have been proven by a preponderance of evidence submitted:

1. MMG has insured this rental dwelling since July 8, 1993. The current policy term is July 8, 2003 to July 8, 2004.
2. A vandalism loss dated 06/01/03 was reported. The date the loss was reported to MMG was unknown. An adjuster inspected the premises at an unknown date, and the claims department sent an advisory to the underwriting department on 07/30/03.
3. Photographs taken by the adjuster establish a number of issues with the property, evidencing lack of maintenance and deterioration over a period of time.

ANALYSIS AND CONCLUSION OF LAW
Jim Stout, Marketing Representative for MMG, testified that the company discovered through the loss adjustment process that the dwelling is a structural risk, with unsafe steps, lack of railings, a hole in the floor, issues with the electrical wiring, a rotted outbuilding in danger of collapse, etc. He provided photographs to establish the condition of the property. He stated that the property had deteriorated and had been improperly maintained in the time since it was first written by MMG, and its condition greatly increases the exposure to fire and liability losses. Although he testified the condition is a substantial change to the risk that was originally written, he did not have the application, photographs or any other documentation to establish that it had been in any other condition.

The Superintendent of Insurance has jurisdiction over this matter pursuant to Title 24-A M.R.S.A. § 3007. MMG Insurance Company bears the burden of proof for establishing that the statutory grounds for policy cancellation exist. Based on the evidence presented at the hearing, the Superintendent hereby concludes that MMG Insurance Company has not established adequate grounds for policy cancellation.

Section 3007 (2)(C) permits cancellation for a substantial change in the risk that increases the risk of loss after insurance coverage has been issued or renewed. To meet this statute, the insurer must demonstrate three distinct components:

• That a substantial change in the risk has occurred;
• That the stated change increases the risk of loss; and
• That the change has occurred since the policy was issued or renewed.

There is no question that the condition of the property increases the risk of loss from several different perils covered by the policy, but MMG was unable to establish that the condition was in fact a change or when that change occurred. The policy renewed on July 8, 2003, and the company’s testimony was that the change had occurred over time. The condition of this property clearly could not have developed since the renewal date. MMG argued that the condition had changed since it was written, and that the governing statute allowed cancellation if the change occurred since the policy was first issued, regardless of any renewals that may have been issued in the interim. Such an interpretation is inconsistent with the statute’s wording, but is a moot point in this case, as the company could not establish the condition of the property at any other point in time besides its current condition.

ORDER AND NOTICE OF APPEAL RIGHTS

The intended cancellation is not approved. MMG Insurance Company is hereby directed to continue coverage under Policy #10877108 until or unless a subsequent notice of cancellation or nonrenewal is effected in accordance to the appropriate statute.

This Decision and Order is a final agency action within the meaning of the Maine Administrative Procedure Act. It is appealable to the Superior Court in the manner provided in Title 24-A M.R.S.A. § 236 and M.R. Civ. P. 80C. Any party to the hearing may initiate an appeal within 30 days after receipt of this notice. Any nonparty whose interests are substantially and directly affected may initiate an appeal within 40 days of the effective date of this Decision and Order.

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